• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Inflation is driving up consumer credit card debt by billions of dollars
Editor's Pick

Inflation is driving up consumer credit card debt by billions of dollars

by September 14, 2023
by September 14, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

A combination of inflation and climbing interest rates seems to be stretching consumers’ balance sheets, but it’s not clear yet whether they’re getting to a breaking point.

Newly released data from WalletHub says U.S. consumers took on $43 billion in additional credit card debt during the second quarter of this year, ending in June. That’s more than triple the average amount of new debt households have taken on in that period since after the Great Recession of 2007-08.

Total credit card debt and debt per household grew by about 8% from the year before, according to WalletHub, a personal finance website. It based its calculations on data from the Federal Reserve and the credit reporting agency TransUnion.

Credit card debt at the average household stood at $10,170 at the end of June. While those balances are rising, the average household has a bit less monthly credit card debt than it did before the coronavirus pandemic took hold in early 2020. Things were also worse before the financial crisis; WalletHub says its all-time high debt reading was $12,412 per household.

Still, the effects of higher interest rates seem clear. The benchmark U.S. interest rate was a little above zero until March 2022, at the end of the first quarter of the year. Then the Federal Reserve began quickly raising interest rates. After the latest hike in July, rates are now in a range of 5.25% to 5.50%, the highest they’ve been in more than 20 years.

That allows credit card companies to charge higher interest rates, making balances tougher to pay off. Data from the St. Louis branch of the Federal Reserve shows credit card interest rates have soared to more than 20%, the highest since the Fed began tracking them in 1994. A year ago, the rate was about 16%.

The big picture

That might all sound bad, but Ryan Boyle, a senior economist in the Global Risk Management division at Northern Trust, says it’s not as concerning as it appears.

‘I see debts as having risen largely as a function of inflation,’ Boyle said. ‘Even though consumers are carrying larger balances, they are earning higher wages that help them to keep pace.’

In other words, Boyle said, credit card spending is definitely up, but it’s not clear that a lot of Americans are having harder times paying off their balances. WalletHub says that credit charge-offs rose almost 12% in the April-June period compared to last year but that the overall rate of charge-offs is just 3.38%.

He added that in the early years of the pandemic, when Congress approved multiple stimulus payments to the public and people were spending much less on travel or dining out, household finances were usually healthy and delinquencies were very low.

But if the overall picture looks decent, there are some important distinctions to keep in mind. Bill Adams, the chief economist at Comerica, said that the combination of rising salaries and slowing inflation has been good for people in working-age households but that many people have spent down the financial cushion they amassed during 2020-21.

‘Pandemic-era savings are largely spent down for most middle-income and lower-income households,’ Adams said.

And another factor might make the increases more painful for some consumers: The pause on federal student loan payments ended Sept. 1. They were paused in March 2020 because of the pandemic, and the hold persisted for 3½ years.

Student loan balances have already begun accruing interest again, and soon, borrowers will be expected to start making regular payments. Adams said that’s going to hurt lower-income borrowers who took federal student loans but didn’t receive degrees, and it might also cut into spending by people who have advanced degrees and earn higher salaries.

Both of those scenarios paint a potentially worrisome economic picture going forward, Adams said.

‘The restart of student loan payments for those higher-income, young and middle-age professionals could be a big drag on consumer spending by that cohort,’ he said.

This post appeared first on NBC NEWS
You Might Also Like
  • Paramount says CEO Bob Bakish is stepping down, will be replaced by a trio of executives
  • Oil executives bluntly criticize Trump tariffs and ‘drill, baby, drill’ mantra
  • About 800,000 BetterHelp online therapy customers receive refund notices
  • As Tesla layoffs continue, here are 600 jobs the company cut in California
Share
0
FacebookTwitterPinterestWhatsapp

previous post
The Halftime Show: 6 ETFs That Are on My Radar
next post
Unemployment to Rise into 2024

You may also like

Social Security advocates brace for U.S. debt default: Seniors should...

May 15, 2023

Collapsed crypto exchange Mt. Gox is about to unload $9...

July 3, 2024

Why ‘wardrobing’ retail fraud soars in the summer

August 8, 2024

Tesla investors want Elon Musk to answer questions about ‘salute,’...

January 30, 2025

Stock splits are back in fashion. Here’s why, and which...

June 17, 2024

Dental supply stock surges on RFK’s anti-fluoride stance, activist involvement

November 19, 2024

How In-N-Out Burger’s president runs her fast-food empire: Keep it...

April 18, 2024

Temu slashes U.S. ad spending, plummets in App Store rankings...

April 16, 2025

PepsiCo buys prebiotic soda brand Poppi for nearly $2 billion

March 17, 2025

How the IoT Can Make Shipping More Efficient

November 24, 2022

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,632 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Latest jobs report signals that interest...

    February 3, 2024

    Dow slips for first losing day...

    May 15, 2024

    First Republic bank says deposits tumbled...

    May 3, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here